What happens to customer deposits when a business is sold?

A deposit a customer paid in advance — for a custom order, a booked service, a retainer — is not free money sitting in the business’s account. It is a liability, an obligation to deliver something or give the money back, and a sale does not make that obligation disappear.

Share sale: the liability stays exactly where it is

Because a share sale leaves the same corporation in place, simply under new ownership, every dollar of deposits that corporation already collected and owes remains its liability after closing, in exactly the same way its other debts do. The buyer inherits it along with everything else on the balance sheet, which is exactly why deposit liabilities should be verified and quantified during financial due diligence, not discovered afterward.

Asset sale: it has to be assigned on purpose

An asset purchase does not automatically carry customer deposits across, because the buyer is a different legal entity than the one that collected the money. The purchase agreement needs to say explicitly whether the buyer is assuming the obligation to honour those deposits, usually alongside a corresponding price adjustment, or whether the seller is expected to refund or fulfill them before or at closing.

Why this shows up in the working-capital calculation

Deposit liabilities are a common line item in the working-capital target negotiated between buyer and seller, because an undisclosed pile of prepaid obligations effectively shrinks the value of what the buyer is actually receiving. A careful disclosure schedule lists outstanding deposits specifically, rather than folding them into a general accounts-payable figure that is easy to miss.

Some deposits carry their own regulatory rules

In certain regulated industries, customer deposits or prepayments must be held in trust rather than commingled with general operating funds, and those rules do not disappear on a sale — they follow whichever entity is legally required to comply with them. Confirming whether the business is subject to any trust or holding requirement for customer money is worth doing early, since it can affect how deposits are handled through the transition.